Here's why all flyers should be worried if Spirit Airlines goes away

CNN

a day ago

Time could be running out for Spirit Airlines to continue operating, which would be bad news not only for its employees and customers but for all people seeking low-priced flights. For decades, the discount carrier has helped push prices down for domestic flights.
Spirit said in a filing last week that there was 'substantial doubt' it could stay in business for more than a year due to continued losses and dwindling revenue. The Florida-based airline, which emerged from bankruptcy earlier this year, said it's making changes to avoid being forced to shut down.
But if the airline does shutter, or is bought by a competitor, that could raise airfares across the board. Spirit's model of offering no-frill, bargain fares (and charging passengers for any extras, including carry-on baggage) has forced the nation's major airlines to offer their own cheap seats, often under the 'basic economy' class of tickets.
'I think you can expect fares to go up in a world where Spirit no longer exists,' said Scott Keyes, CEO of Going.com, a discount airline ticket site. 'Even for folks who never would fly Spirit, you owe them a debt of gratitude for cheaper flights.'
When JetBlue Airways proposed buying Spirit in 2022, the Justice Department successfully argued in court that the merger would hurt consumers by reducing competition and lifting air fares. The deal was blocked on antitrust grounds in early 2024.
'Spirit's presence –- the Spirit Effect – also lowers other airline's fares,' wrote Judge William Young of the US District Court for the District of Massachusetts, in January 2024. 'The record contains numerous examples of Spirit undercutting and putting (pressure on) legacy airlines' and other (low-cost carrier's) fares. When Spirit enters a market, its rivals reduce their prices by between 7% and 11%, on average.'
But Spirit, like most of the other low-cost carriers, has continually lost money since 2020, when the pandemic hit. The company reported a net loss of $256.7 million since it emerged from bankruptcy in March, according to its latest financial report, with revenue this year down 20% compared to a year ago.
Part of that drop is due to Spirit scaling back its flight schedule to stem losses. That affected prices, with fares increasing at an average of 5.7% on the routes Spirit discontinued, according to an analysis by TD Cowen. The difference was even starker in markets where Spirit had a major presence, like between Denver and Fort Lauderdale-Hollywood in Florida. After withdrawing, fares for all flights across major airlines between the two airports rose an average of 22%.
Even if fares don't directly increase on every single route, the other airlines could respond by cutting the number of seats they offer in basic economy throughout their system, said Zach Griff, an airline travel expert and senior writer at The Points Guy, an air travel website.
'Even if you're not flying with (Spirit), they have the effect of lowering fares in the market,' he said.
Spirit CEO Dave Davis, in a note to employees assuring them the airline isn't doomed to close despite the investor warning, made the same argument about its impact.
'Spirit is a critical part of the U.S. aviation industry,' he wrote. 'We have saved consumers hundreds of millions of dollars, whether they fly with us or not. We remain hard at work on many initiatives to protect our unique franchise.'
But even if Spirit isn't forced out of business, it could end up being purchased and merged into another carrier, perhaps at a bargain price.
'Spirit is a very attractive airline for many carriers,' said Griff. 'The planes are very valuable. It's hard to get these planes these days. They have very valuable slots in congested airports like LaGuardia and Newark. So, Spirit has a lot that a carrier might be interested in.'
A deal with one of the major carriers — United, Delta or American Airlines — would confront the same antitrust scrutiny as JetBlue. However, the Trump administration might not be as eager to block a deal as the Biden administration, which took an activist role in antitrust cases.
An offer from another low-cost carrier, such as Frontier, may not face the same legal challenges. But the other budget airlines are experiencing their own financial losses, making any deal difficult. Frontier and Spirit confirmed they had discussions about a deal after the JetBlue deal was blocked, but could not agree upon a price.
But whether it be a major or budget carrier, opponents of airline mergers say another airline purchasing Spirit would still be bad for passengers and fares.
'We don't think the answer to consolidation is more consolidation. This is what has gotten us into this mess,' said William McGee, a senior fellow for aviation and travel at the American Economic Liberties Project, a public interest group concerned with corporate mergers. 'There's never been a merger where the new entity continues to fly on every route and continues to fly as many flights as they did separately. Mergers lead to higher fares.'